Blake Scholl’s inbox lit up last week with California’s mandatory diversity survey, demanding to know if the Boom Supersonic CEO checked boxes for race, gender, or LGBTQ+.
He fired back on X: pure malarkey. Merit over metrics, he said. And just like that—hours before the deadline—the state hit pause.
California’s suspension of its venture capital diversity reporting law marks a stunning reversal. Passed in 2023, signed by Gavin Newsom, the Fair Investment Practices by Venture Capital Companies Law aimed to drag VC funding disparities into the sunlight. Women snag just 2% of VC dollars; Black founders, less than 1%. Lawmakers figured public shaming—er, transparency—might nudge firms toward equity.
Firms had to survey founders on demographics, anonymize it, report annually. Data would hit a public dashboard. Fines for foot-dragging. Simple, right?
Wrong.
What Sparked This VC Diversity Reporting Fiasco?
The National Venture Capital Association hated it from day one. Their beef? Voluntary surveys mean gaming the system—inflated stats, cherry-picked data. Publish that mess, they warned, and genuine diversity efforts get torched by bad-faith critics.
“This administrative timeline creates an environment ripe for error and threatens to produce the misleading and counterproductive data we previously warned against,” association president and CEO Bobby Franklin wrote to Newsom.
Spot on, in their view. State bungled rollout: no standardized survey till early 2025, no registration portal. Deadline chaos.
Tech heavyweights piled on. Joe Lonsdale of 8VC mocked the “ask each CEO if they’re gay” vibe, contrasting California’s nanny-state with Texas’ ballot bans on gender lessons. Scholl? “Boom will not be supporting any of these requests.”
DFPI caved mid-March. Suspension pending new rulemaking—could drag 12 months. “Clarity, collaboration, transparency,” they claim. Smells like industry capture.
But here’s my unique angle, one the original coverage misses: this echoes the 1986 Tax Reform Act’s quiet burial of Hollywood’s affirmative action quotas. Back then, studios fought metrics tracking minority hires—claimed it stifled creativity. Fast-forward; diversity tanks, but blockbusters roll. VCs now wield the same script. Post-Trump DEI purge, California’s lefty lawmakers blink first. Prediction: by 2027, this law’s a ghost, replaced by toothless “best practices.”
Short para punch: Tech won.
Why Did California Chicken Out on VC Diversity Data?
Public pressure. NVCA lobbied hard. Founders griped on socials—survey fatigue amid funding winters. Broader context? Trump-era DEI backlash ripples leftward. Firms like Palantir’s Lonsdale smell blood, posting victory laps: regulators baited curious VCs, then yanked the rug.
Newsom’s office? Silent. DFPI? No comment on sidestepping lawmakers. (Shocker.)
Supporters—diversity-focused VCs—mum now. They backed the law to spotlight inequities: disabled vets, LGBTQ+ founders frozen out. Data as disinfectant, right? Locke would approve.
Yet architecture shifts underneath. VCs architect deals on networks, not spreadsheets. Mandated reporting? Forces a bureaucratic layer atop gut-feel investing. How? Firms hire compliance drones, surveys clog founder inboxes, data gets massaged. Result: less trust, more lawyers. Why comply when merit’s the real VC religion?
Look, equity’s real. Stats don’t lie. But top-down metrics? They warp behavior. Remember college admissions post-Bakke? Quotas died; holistic reviews surged—with backdoor biases intact.
How Will This Reshape Tech Funding?
Suspension buys time. New rules might soften: opt-ins, aggregated data only, no founder-level prying. Or kill it outright.
For VCs, exhale. No more “queer native” gotchas, as Lonsdale joked about his portfolio. Focus returns to traction, TAM, moats—not skin color.
Founders? Mixed. Underrepresented ones lose a megaphone. But surveys felt invasive; Scholl’s rage resonated.
Industry-wide, it’s a signal flare. Post-2024, blue states waver on DEI mandates. California’s VC law joins a pile: delayed AB 3129 on AI safety, softened gig worker rules. Tech’s lobbying muscle flexes.
Deeper why: VCs chase unicorns, not UN Sustainable Goals. Diversity funds exist—Blavity, Backstage—but mainstream LPs demand returns, not rainbows. Forcing disclosure? Risks capital flight to Texas, Florida. Austin’s VC scene booms; Silicon Valley shrinks.
And the human cost. A Black female founder skips California cash, heads to NYC. Merit suffers? No—systemic gaps persist, unmeasured.
Wander a bit: imagine the survey. Tick boxes while pitching warp drives. Absurd.
Is DEI Dead in Silicon Valley VC?
Not quite. But mandated? On life support.
Private pledges endure—All Raise, #MoveTheDial. VCs tout diverse LPs now. But government boot? Off the neck, for now.
My bold call: expect NVCA counter-proposal. Self-reported aggregates, no fines. Toothless transparency theater. Lawmakers cave; Newsom signs for “stakeholder input.”
Meanwhile, real shifts brew. Crypto VCs ignore it all—pseudonymous founders defy surveys. AI startups? Demographic opacity baked in.
So, California’s pause. Tech’s meritocracy roars back. Equity warriors reload. Next round?
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Frequently Asked Questions
What is California’s VC diversity reporting law?
It required VC firms to collect and report anonymized demographic data on funded founders’ gender, race, LGBTQ+ status, and more, aiming to expose funding gaps.
Why did California suspend enforcement?
Industry backlash over bungled rollout, fears of bad data, and privacy gripes from CEOs like Blake Scholl led DFPI to pause for new rulemaking.
Will VC diversity reporting return in California?
Likely reworked—less punitive, more collaborative—but full enforcement? Doubtful amid national DEI retreats.
